Question 1. You read in the paper a story about grapefruit markets. The story contains the following information:
A. There has been a frost in the "Grapefruit belt" and a lot of lost plants.
B. There is a new kind of fertilizer that can increase yields by 20%
C. The International Union of Grapefruit Pickers and Packers has just negotiated a contract with most growers calling for a 30% wage increase.
D. A new study indicates that grapefruit significantly reduces the risk of cancer and the Grapefruit Association is starting an ad campaign to inform consumers of this.
Take each of these (A-D) and use supply and demand analysis to determine the impact on price and quantity of grapefruits sold of each and the overall net impact. Also, discuss how this might impact the demand for other fruits and breakfast cereals. Also, make sure you discuss and impact of these on the elasticity of demand for grapefruits.
Question 2. Use the theory of consumer behavior to explain the relationship between quantity demand and price and to explain why demand curves slope downward.
Question 3. Define price elasticity of demand and discuss how it is calculated. What are the determinants of elasticity? How does it relate to consumer expenditures and price.